Porter Airlines expansion plan could hit hurdles

Tue Apr 9, 2013 3:14pm EDT

* Porter seen announcing CSeries order Wednesday

* Operating jets from Porter's Toronto base poses problems

* Porter order could create third cross-Canada carrier

By Susan Taylor

TORONTO, April 9 (Reuters) - Canadian regional carrier Porter Airlines is expected to announce an order for 12 of Bombardier Inc's new CSeries jets on Wednesday, a likely challenge to restrictions at its Toronto Island airport base.

The privately held airline, which says it will announce "expansion plans" at a morning press conference, could create a third cross-country carrier with the deal, ratcheting up competition for Canada's No. 1 and 2 airlines, Air Canada and WestJet Airlines Ltd.

Porter is expected to announce a firm order for 12 of Bombardier's CS100 jets, with options for another 18 of the 110-seat aircraft, according to The Wall Street Journal, which cited unnamed sources.

Porter Airlines did not respond to requests for comment, and Bombardier spokesman Marc Duchesne said the Montreal-based company would not comment on "industry speculation."

Bombardier in December announced a firm order to an "unidentified customer" for 12 CSeries worth $870 million at list prices, with options for another 18 aircraft that would swell the deal value to $2.08 billion.

Buying CSeries jets would provide Porter with opportunity for longer flights and route expansion. But it also raises questions about its ability to operate the CSeries from Billy Bishop Toronto City Airport (BBTCA).

Under an airport agreement between the city of Toronto, government of Canada and Toronto Harbour Commission, a rule bans the operation of jet-powered aircraft, which would include the CSeries. ()

There is speculation that Porter may lobby to have the airport rules changed, arguing that the "noise footprint" from the CSeries is not dissimilar to that of the 70-seat Q400 turboprop planes it currently flies.

Bombardier and engine manufacturer Pratt & Whitney promise a "low noise footprint and just 70 decibels approaching the airport," wrote Scott Hamilton, an aviation analyst with Leeham Co, noting that the airport is "highly noise sensitive."

Seven-year-old Porter currently flies a fleet of 26 Q400 propeller planes to more than a dozen cities in eastern Canada and the United States, with routes restricted by the plane's range of approximately 1,000 miles.

The CS100 has a range of some 3,066 miles, but that distance can be sharply reduced by runway length.

"We suspect that any move to open up the BBTCA to jets will be met with fierce opposition so there is no guarantee that the airline will be allowed to operate the CS100 from its main hub," said National Bank Financial analyst Cameron Doerksen in a note.

If Porter plans to fly the CSeries from another airport that does not connect to its Toronto Island base, its advantages over Air Canada and WestJet would be "limited at best," Doerksen added.

"Indeed, the history of airlines in Canada attempting to grow from regional players into national players is not positive," he wrote.

Porter Chief Executive Robert Deluce has hinted in the past that his airline could expand into Western Canada, a strategy that would invite a tough competitive response from Air Canada and WestJet, Doerksen wrote.

The island airport's runways could pose a further problem. While the longest runway is approximately 4,000 feet, matching the CSeries requirement for takeoff, the jet requires 4,400 feet for landing, Bombardier said.

That means the airport would require a "significant rework" for the planes to operate, RBC Capital Markets analyst Walter Spracklin said in a note.

"Porter could also be looking to deploy the CSeries from alternate airports, including Montreal, to destinations in the U.S. and significantly expand its footprint on those routes," he wrote.

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